Gowdy's novel Falling Angels (1989) was made into a film of the same name by director Scott Smith, from an adaptation written by Esta Spalding, in 2002. The novel focuses on a nuclear family in a 1960s Ontario suburb. The main characters are three sisters who come of age in a house run by their abusive and womanizing father and must constantly find ways to take care of their depressed and alcoholic mother. Gowdy says her inspiration for the book was the idea of a Canadian family living during the Cold War and practicing using their bomb shelter in the back yard. In the novel and movie, the family spend two weeks trapped in the bomb shelter as an "exercise" rather than going on a family trip to Disneyland.

Authors such as Alice Munro and Carol Shields look at the everyday, but the bulk of Gowdy's work reflects upon the opposite. Gowdy's stories look at the extreme, the strange and the abnormal, but she attempts to make her characters relatable and poignant. She often draws on magic realism as a writing style, combining the fantastic or unusual with realistic and believable descriptions, placing her within the tradition of Southern Ontario Gothic.

The narrator and main character of the title short story of her 1992 collection, We So Seldom Look On Love, for instance, is an assistant embalmer at a funeral home who makes love to the bodies of attractive young men before they are buried. The story was the inspiration for the 1996 Canadian independent film Kissed, directed by Lynne Stopkewich and starring Molly Parker. The story is based on Frank O'Hara's poem "Ode to Necrophilia", and was inspired by a newspaper article Gowdy read about a young California woman who hijacked a hearse on its way to a funeral, took the corpse of the young man inside the coffin to a motel room and had sex with it for several days before being caught by the police. We So Seldom Look On Love is meant as a compilation of circus-type characters and their quest to find connection with others. Another story features a two-headed man who removes one of his heads. A third story in that collection, "93 Million Miles Away" involves a woman who masturbates and exposes herself through the window of her apartment to a man in his apartment across the street. This story was made into the film Arousal.

Similarly, her novel Mister Sandman revolves around the family of Joan, a young autistic girl with a savant talent for playing classical music on the piano, and her novel The White Bone is written from the perspective of an elephant.

Gowdy was nominated for a Governor General's Award for her novels Mister Sandman (1995), The White Bone (1998), and Helpless (2007). The White Bone was also nominated for the Giller Prize. The Romantic (2003), a best-seller in Canada, was nominated for several awards, including the Man Booker Prize. It was a finalist for the Rogers Writers' Trust Prize and the Commonwealth Writers' Prize for Best Book. Helpless also won the Trillium Award.

She was appointed a member of the Order of Canada effective 5 October 2006.

In June 2008, Gowdy's 2007 novel Helpless, which follows the stalking and kidnap of a nine-year-old girl, was abridged and adapted for BBC Radio 4's Book at Bedtime. This resulted in several listeners complaining that the novel was 'dark', 'disturbing' and had '(frightened) the life out of them'. One listener described it as 'inappropriate for any time of day least of all at bedtime' and another claimed that Gowdy's graphic description made him feel 'physically sick'. Commissioning editor Caroline Raphael defended the BBC's choice stating "It is about a very difficult subject ... Unfortunately, writers do want to write about disturbing things" she also added unhappy listeners could simply "turn off".